SEBI, also known as the Securities and Exchange Board of India, stands as a leading institution established by the Indian Government to enhance the oversight of the securities market within India. At its core, SEBI strives to safeguard the interests of securities investors while fostering and controlling the securities market’s progression to ensure both orderly expansion and ample protective measures.
Central to its role is the formulation of policies, regulations, and suggestions that facilitate the seamless operation of stock exchanges. It takes on the responsibility of supervising these exchanges to prevent unlawful practices like fraudulent activities and insider trading. SEBI came into existence as a statutory organisation, operating under the guidelines of the Securities and Exchange Board of India Act, 1992. This legislation shapes SEBI’s authority in regulating the securities sector through the SEBI Regulations of 1992. In this blog, we will see the powers of SEBI in India.
Organisation of SEBI
A department head oversees each of the numerous departments that make up SEBI’s organisational structure. SEBI comprises roughly 20 departments. Corporate finance, economic and policy analysis, debt and hybrid securities, enforcement, human resources, investment management, legal affairs, and more are a few of these divisions.
Role of SEBI
Before getting to the powers of SEBI in India, let us first see the role of SEBI as a market regulator. The regulatory body acts as a guardian for everyone involved in the capital market. Its main objective is to create a favourable setting for those keen on the financial markets. This environment encourages the smooth and efficient functioning of the securities market. The SEBI’s influence on the economy is substantial. It’s role includes regulating the following entities:
1. Securities issuers
These corporate organisations raise money from a variety of sources on the market. This organisation sees to it that they receive a safe and open atmosphere that meets their requirements.
2. Trader
The markets are kept active by investors. To regain the trust of the general public who put their hard-earned money into the markets, this regulatory body is in charge of preserving an environment free from fraud.
3. Institutional Money Managers
These are the individuals who serve as intermediaries between issuers and investors. They facilitate and secure financial transactions.
What are the Powers of SEBI in India?
The powers of SEBI in the country are as given below:
Registration of Market Intermediaries
One of the first and foremost powers of SEBI is the authority to provide registration to market intermediaries. These intermediaries encompass stockbrokers, sub-brokers, merchant bankers, portfolio managers, and other entities engaged in securities trading.
The process of registration entails a comprehensive evaluation of the intermediary’s past performance, financial solidity, and adherence to regulations. Additionally, SEBI retains the capability to withdraw the registration of an intermediary if any engagement in deceitful or morally unacceptable conduct comes to light.
Regulation of Securities Markets
Another key power of SEBI is that it is responsible for regulating the securities market by making rules and regulations for market participants. It issues guidelines for disclosures and investor protection and ensures that all market participants comply with the applicable laws. The powers of SEBI in this regard include:
- Approve the listing of securities on stock exchanges
- Regulate the activities of stock exchanges, depositories, and clearing corporations
- Issue regulations for the conduct of business by intermediaries such as brokers and portfolio managers
- Prescribe standards for financial disclosures by listed companies
- Regulate the conduct of mergers and acquisitions in market.
Enforcement of Securities Laws
Yet another significant aspect of powers of SEBI in India is the power to investigate and take enforcement action against violations of securities laws by market participants. This includes imposing penalties, and fines, and initiating legal proceedings against errant parties. Some of the key enforcement powers of SEBI in India include:
- Conducting investigations into suspected violations of securities laws
- Imposing penalties for non-compliance with regulations
- Ordering disgorgement of illegal profits made by market participants
- Prohibiting individuals from accessing the securities market.
The powers of SEBI in India also include power to issue directions to market intermediaries, listed companies, and other entities in the securities market to comply with the applicable regulations.
Monitoring Insider Trading
SEBI bears the duty of overseeing insider trading occurrences within the securities market. Thus, one of the major powers of SEBI is that it is entrusted with the task of responding suitably to any cases of insider trading. Insider trading involves the utilisation of confidential information to engage in securities trading, potentially granting certain investors unjust advantages. The powers of SEBI in this regard include:
- Monitor trading patterns of insiders such as directors, officers, and key managerial personnel of listed companies
- Investigate suspected instances of insider trading
- Take action against market participants involved in insider trading, including imposing penalties and disgorgement of profits.
Investor Protection
SEBI holds the responsibility of safeguarding the concerns of investors involved in the securities market. It accomplishes this by establishing guidelines for transparent information sharing, encouraging the enlightenment of investors, and responding to instances of market manipulation and deceit. Some of the key powers of SEBI in India regarding investor protection include:
- Requiring listed companies to make disclosures about their financial performance, shareholding patterns, and other material information
- Promoting investor education and awareness through publications, seminars, and other initiatives
- Regulating the conduct of mutual funds and other investment vehicles to ensure that they act in the best interests of investors
- Taking action against market manipulation, insider trading, and other fraudulent practices that harm the interests of investors.
Regulation of Mutual Funds
The task of overseeing the operations of mutual funds in India lies with SEBI. This includes the registration of mutual funds, vigilant supervision of their actions, and guaranteeing their adherence to the relevant rules and regulations. Some of the key powers of SEBI in India regarding mutual funds include:
- Setting standards for the investment portfolios of mutual funds
- Regulating the fees and expenses charged by mutual funds
- Monitoring the performance of mutual funds to ensure that they deliver the promised returns to investors
- Requiring mutual funds to make disclosures about their investment objectives, strategies, and performance.
The powers of SEBI in India also include taking action against mutual funds that violate the applicable regulations, including revoking their registration, imposing penalties, and requiring them to make restitution to investors.
Final Thoughts
SEBI stands as a guard of India’s securities landscape, empowered with multiple functions and powers of SEBI in India. As the custodian of investor interests, it ensures market integrity and transparency through stringent regulations. Its jurisdiction over market intermediaries, insider trading, and investor protection secures the market’s foundation. SEBI’s influence extends to mutual funds, guaranteeing investor welfare and industry accountability.
By striking a delicate balance between regulation and growth, SEBI facilitates a conducive environment for investment, promoting trust and confidence among stakeholders. In its pursuit of orderly growth and investor safeguarding, SEBI propels India’s securities market towards a future of resilience and responsible dynamism.
